IHT & Property

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Kontiki
Kontiki Posts: 61 Forumite
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in Deaths, funerals & probate
We made our wills several years ago, they are quite simple in that they are mirror wills leaving everything eventually to our 2 daughters. I think the threshold is £325k & from what I understand this is passed on to the surviving spouse so they have a tax free allowance of £650k where I am unclear is about the rules regarding our house. This is set to rise to £175k next year so does this mean that a married couple then effectively will have a joint inheritance tax free allowance of £1million. Do we need to alter our wills to cover the house or is it automatic that the extra allowance is added as we left the whole estate to our 2 daughters.
Ed

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  • pphillips
    pphillips Posts: 1,631 Forumite
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    The IHT allowances (effectively up to £1 million) will apply automatically when you leave your house to your daughters, other than by a discretionary trust, provided the total estate does not exceed £2 million.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    It is not automatic and the house house needs to be worth at least £300k to get the full £1m

    Also depends on the structure of the wills.
  • SeniorSam
    SeniorSam Posts: 1,670 Forumite
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    With the simple Wills you have, if the first to die leaves everything to their spouse, then both nil rate band allowances, currently £325,000, will be allowed. In addition, residential allowance of £175,000 each from next year will be allowable. Therefore a maximum of up to one million pounds could be available, so you are correct in your thinking.

    Hopefully, care costs will not come up, but if they do, then your overall estate value could be far less in having to meet care costs over a number of years. Take advantage of gifting allowances if you are able to do so.
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, but my comments here and on Legal Beagles as Sam101 are just meant to be helpful. Do ask questions from the Members who are here to help.
  • relaxtwotribes
    relaxtwotribes Posts: 369 Forumite
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    getmore4less wrote: »
    It is not automatic and the house house needs to be worth at least £300k to get the full £1m

    Correct me if I am wrong, but do you mean £300k to get the full £950k (in this tax year , rising to £350k to get the full £1m from 6/4/2020)?
  • Yorkshireman99
    Yorkshireman99 Posts: 5,470 Forumite
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    relaxtwotribes wrote: »
    Correct me if I am wrong, but do you mean £300k to get the full £950k (in this tax year , rising to £350k to get the full £1m from 6/4/2020)?
    Check with your solicitor.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    relaxtwotribes wrote: »
    Correct me if I am wrong, but do you mean £300k to get the full £950k (in this tax year , rising to £350k to get the full £1m from 6/4/2020)?
    Yes.
    Downsizing rules can also mean you don't have to stay in a higher value property.
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